Need help with probabilities

[athlonmank8]

I had this one saved as a bookmark. You have to wade through the normal Elite Trader version of "Your Mother wears combat boots" but there is some useful information in it.

Thread title: Probability of Success in Spreads
http://www.elitetrader.com/vb/showthread.php?t=262880

 

[Martinghoul]

Yes, that's what I wanted to know; the market guess as at the trading instant. I understand that with every passing moment, the odd changes. My bad, I wasn't clear in my statement.

When you say the price of the spread defines the odds, I'm assuming with great risk comes great reward; hence lower probabilities. But is there a way to interpret this assumption in numbers ?

Like Windlesham alluded to, the price that you pay for the spread vs the spread between the two strikes gives you the odds of "success". Of course, note that "success" here is defined as making the max possible amt on the position, rather than making more than you spent.